[laylower]

Iamontocg, this would have been a sufficient explanation in a market with no interdependencies. Yet, the cause of the problem is not workers aiming for a living wage when the income inequality is at its all-time high.

Inflation causes vary: 1) Covid business loans 2) Cost of logistics post covid 3) Corporate profits recently hit all time high 4) FX rate with EUR and GBP

I agree that the vanilla solution seems to be the most effective - the knob as you called it. But that doesn't mean that it's going to be painless when credit expansion and overleveraged businesses and people are hit with the new higher rates.

[lamontcg]

I don't know what made you think I suggested that this would be painless

FX rates are also the result of twisting the knob, not the cause.

And there's a lot of other factors in inflation, but the wage inflation is the one that has the Fed worried. The Fed knows everything else is cyclical and they weren't worried in the commodities boom and high oil prices in 2010-2014. The reason why they're so worried now is wage inflation. We haven't had wage inflation this high in 30 years and the Fed hasn't thrown on the brakes this hard since I can remember. This isn't the 25bp tightening every meeting of the Greenspan Fed.

[thunky]

But there is no wage inflation overall. In real terms, wages are declining except for maybe the lowest earners [0]. For some reason that's unacceptable.

[0] https://www.americanprogress.org/article/wages-and-employmen...

[lamontcg]

> In real terms

Nominally they are increasing, that is a component of inflation. Inflation-adjusting the nominal rise of prices that are causing inflation just hides the inflation. You can't analyze it that way.

> For some reason that's unacceptable.

I'm not the Fed, I don't support what they're doing, I'm just explaining it.

EDIT: research from the Fed:

https://www.frbsf.org/economic-research/publications/economi...

Wage growth is over 6%. The fact that inflation overall has been running higher than that so real wage growth has been negative doesn't mean there's been no wage inflation.

Inflation is just the rise in prices. You're thinking about the overall effect on society, but that is second/third/fourth order effects.

Nominal wages rising 6%, even though real wages are rising 0% still means an environment with 6% overall inflation, which exceeds the Fed's target of 2%.

[paulmd]

> Inflation-adjusting the nominal rise of prices that are causing inflation just hides the inflation. You can't analyze it that way

Actually you can not just analyze but neutralize it that way. If everyone agrees to a wage that is indexed to inflation, and then starts numerating prices in that inflation-indexed currency... suddenly you don't have inflation anymore.

https://en.wikipedia.org/wiki/Plano_Real

Maybe the US is starting to get to the "inertial inflation" situation, with workers demanding wages accounting for expected future increases and companies starting to structure costs along those expectations as well.

[thunky]

Yeah, just because wages are a component of inflation doesn't mean we can't talk about them in real terms. Same for housing, also a component of inflation: if house prices rise/inflate 2% while inflation is 10%, it's fair to say that housing declined 8% in real terms.

[lamontcg]

You can talk about wages in real terms in order to see what their impact is on the actual buying power of the average worker.

But if you're trying specifically to discuss and talk about the wage component of inflation it is nonsense to talk about that in real terms. Adjusting to eliminate the effect of inflation on wages is not the way to measure wage inflation. It should be intuitively obvious that is nonsense.

[theropost]

In Canada, Ontario was forecasting a $30 billion dollar deficit for the current fiscal year. When the final numbers were in, they reported a $2 billion dollar surplus - even with higher expenses. The nominal revenue growth was 11.9% - inflation boosts the coffers.

[landemva]

For your item 1, those loans became gifts.

And point 5 could be ever-increasing federal spending beyond federal taxation.